Santiago City, Philippines

COLLEGE OF ACCOUNTANCY AND BUSINESS ADMINISTRATION

COST ACCOUNTING

STANDARD COSTING
______________________________________________________________________________
Standard These variances are calculated whenever the production
a benchmark set by management in aid of performance process involves combining several materials in varying
measurement. When it comes to production, standards are proportions to produce a unit of product.
classified as follows.
*Quantity Standards- normally expressed per unit of
output (e.g., 3 pounds per unit) Exercises:
*Cost Standards- normally expressed per unit of input 1. The standard cost of direct material used by ARLYN
(e.g., P 2.50 per pound) Company for its lone product is P 3 per unit. During the
month, 500 units of materials were purchased at a total cost
Standard Costs of P 1,400 while only 400 units of materials were used during
Systematically pre- determined costs established by the month; however, the standard quantity allowed for actual
management to be used as a basis for comparison with production is 380 units.
actual cost. Required: Determine the following:
A. Flexible budget variance ______________
Importance of Standard Costing B. Materials quantity variance ____________
Simplifies Costing C. Materials price usage variace ____________
Evaluation and control D. Materials purchase price variance _________
Planning and pricing
Exception "Variance Analysis" 2. Materials and Labor Variances
Cost conscious * Standard variable costs per unit:
A. Materials: 4 pounds @ P________
Setting Standard B. Direct Labor: _____ hours @ 12.00
Ideal= perfect performance [ impossible ] C. Variable Overhead: P 8 per direct labor hour
Normal = efficient performance- "BASIS" * Production. 8,000 units
* Materials purchases, 32,000 pounds. P 62,000
Standard Cost Variance Analysis * Materials used at standard prices, 31,200 pounds
[Variance = Actual Costs(AC) - Standard Costs(SC)] P___________
AC > SC: Unfavorable ( debit balance ) * Direct labor ( actual ) _______ hours. P 47,200
AC < SC: Favorable ( credit balance ) * Material purchase price variance P 2,000 adverse
* Material use variance. P ______________
"Materials Variance" * Direct labor rate variance. P 2,000 Favorable
“Actual material *Direct labor efficiency variance P __________
Used” * Variable overhead spending variance
MQV MPV P 1,500 Favorable
Actual X X * Variable overhead efficiency variance P _______
Standard X X * Actual variable overhead cost. P __________
Difference X X
Times X X REQUIRED: Fill- in the blanks.
Total Variance X X (Adapted: Managerial Accounting by Louderback, et.al)

“Actual material purchased” 3. Bellha Company provides the following production data:
Total standard overhead cost per unit of product:
Note: If actual material used is different from actual material 4 hours at P 3.00 per hour= P 12.00 per unit
purchased, the Flexible Budget Variance was cannot be *Budgeted fixed factory overhead. P 20,000
determined. *Normal production. 2,500 units
*Actual production. 2,000 units
"Labor Variance" *Actual Hours. 7,500 hours
MQV MPV *Actual FO incurred (75% fixed). P 26,000
Actual X X
Standard X X REQUIRED:
Difference X X Determine the following;
Times X X A. Budgeted factory overhead ______________
Total Variance X X B. Standard factory overhead ______________
C. Controllable variance _________________
"Factory Overhead Variance:" D. Volume variance ____________________
[4 way Variance:] E. Variable efficiency variance _______________
F. Spending variance ________________
Quantity Price G. Variable spending variance _________________
Fixed H. Fixed Spending variance ___________________
Variable
Fixed 4. Criselda produces the popular Walang Anan face powder.
Variable Criselda has in its budget the following standards for one kilo
Fixed of the Walan Anan face powder:
Variable * in Standard
Fixed Ingredients. Quantity. Unit Cost. Cost
Variable Paminta (20%). 200. P 3.00. P 600
Gawgaw (70%). 700. 4.00. 2,800
"Materials Price, Mix and Yield Variances" Luya (10%). 100. 5.00. 500

VJ De Leon Page 1
The company reported the following production and cost A. P 28,000 Over-applied
data for the JUNE operations: B. P 28,000 Under-applied
* in Actual C. P 36,000 Over-applied
Ingredients. Quantity. Unit Price. Total Cost D. P 36,000 Under-applied
Paminta. 45,000. P 4.00. P 180,000
Gawgaw. 125,000. 3.00. 375,000 10. Each finished unit of Product Imy contains 60 pounds of
Luya. 30,000. 6.00. 180,000 raw material. The manufacturing process must provide for a
TOTAL. 200,000. 735,000 20% waste allowance. The raw material can be purchased
for a cost of P 2.50 a pound under terms of 2/10, n/30. The
Walang Anan face powder production in June totaled 190 company takes all cash discounts. The standard direct
kilos. There was no work-in-process inventory. material cost of each unit of product Imy is
A. P 147.00
REQUIRED: B. P 187.50
A. Material price variance ________________ C. P 183.75
B. Material mix variance. ________________ D. P 150.00
C. Material yield variance ________________
11. Which of the following is a purpose of standard costing?
5. Dhelia Company's direct-material costs is as follows: A. To simplify costing procedures and expedite cost
Standard unit price. P 3.60 reports
Actual quantity purchased. 1,600 B. To replace budgets and budgeting
Standard quantity allowed for C. To use them as a basis for product costing for external
Actual production. 1,450 reporting purposes
Materials purchase price variance 240( F ) D. To eliminate under/over applied factory overhead at the
end of the period
What was the actual purchase price per unit, rounded to the
nearest centavo? 12. Under a standard cost system, the materials efficiency
A. P 3.06 B. P 3.11 variances are the responsibility of
C. P 3.45 D. P 3.75 A. Production and industrial engineering
B. Purchasing and industrial engineering
6. Editha Company uses standard costing. The following C. Purchasing and sales
data are available for October: D. Sales and industrial engineering

AQ of direct materials used. 23,500 pounds 13. A credit balance in the labor efficiency variance indicates
SP of direct materials. P 2 per pound that:
MQ variance. P 1,000 ( UF ) A. Standard hours exceed actual hours
B. Actual hours exceed standard hours
The standard quantity of materials allowed for October C. Standard rate and standard hours exceed actual rate
production is? and actual hours
A. 23,000 pounds B. 24,000 pounds D. Actual rate and actual hours exceed standard rate and
C. 24,500 pounds D. 25,000 pounds standard hours

7. Faith Corporation uses a standard cost system. Direct 14. The materials cost variance is composed of
labor information for product C for the month of October is as A. Quantity and Efficiency Variances
follows: B. Quantity and Price Variances
Standard rate. P 6.00 per hour C. Price and Mix Variances
Actual rate paid. P 6.10 per hour D. Mix and Yield Variances
Standard hours allowed for
Actual production. 1,500 hours 15. Standard cost are least useful for
Labor efficiency variance. P 600 (UF) A. Measuring production efficiency
B. Simplifying costing procedures
* What is the actual hours worked? C. Estimating future cost
A. 1,400 B. 1,402 D. Determining minimum inventory levels
C. 1,598 D. 1,600

* What was Faith direct labor payroll for the month of of

October?
A. P 9,760 B. P 9,150
C. P 9,600 D. P 9,000

8. Gretchen department information for the first quarter of

2013:
Actual total overhead. P 178,500
Budget formula P 110,000 plus P 0.5 per hour
Total overhead application rate. P 1.50 per hour
Spending variance. P 8,000 UF
Volume variance. P 5,000 F
Over-all factory overhead variance. P 6,000 UF

* What were the actual hours worked in this department

during the quarter?
A. 110,000
B. 121,000
C. 137,000
D. 153,000
* What were the standard hours allowed for good output in
this department?
A. 105,000
B. 106,667
C. 110,000
D. 115,000

9. Hannah has a P 20,000 UF fixed overhead budget

variance, a P 12,000 UF variable overhead spending
variance, and P 4,000 F volume variance. The total
overhead was?

VJ De Leon Page 2